DraftKings (DKNG) Stock Analysis 2025: Recovering After 45% Drop with Growth Potential

DraftKings Inc. (DKNG), a leading sports betting and fantasy sports platform, experienced a remarkable surge in 2020, with its stock soaring over 600% to reach an all-time high of $64.19 by early October. However, the shortened MLB and NBA seasons resulted in disappointing viewership, triggering a sharp selloff that pushed the stock down nearly 45% to a low of $34.90 in early November.

Key Insights

• DraftKings hit record highs in late 2020, reflecting explosive growth in online sports betting.
• The stock experienced a steep 45% correction amid market volatility and reduced sports engagement.
• Technical indicators show the stock has reached strong harmonic support and is deeply oversold, limiting further downside risk.

This week, DraftKings has shown a robust bounce, fueled by the broader market's post-election rally. Despite this rebound, the recovery is expected to be gradual due to the heavy volume selloff that significantly lowered accumulation-distribution metrics to levels unseen since April 2020. Additionally, the stock broke below key technical supports including the 50-day exponential moving average (EMA) and the September breakout zone around the $40 range, establishing this area as strong resistance.

Price gains stalled near this resistance last Friday, indicating a possible retest of the recent low near $33, just above the 200-day EMA. This scenario raises the possibility of a final wave of selling before a more sustained recovery in 2024, especially as the sports industry anticipates a return to full seasons. Meanwhile, DraftKings is actively pursuing new partnerships with local governments to capitalize on the expanding acceptance of online sports betting.

Wall Street sentiment remains optimistic, with a "Moderate Buy" consensus based on 13 buy and 6 hold ratings. No analysts currently advise selling, despite the recent decline. Price targets range from $37 to a high of $76, indicating significant upside potential once macroeconomic challenges subside.

Trading Insight

A failed breakout occurs when a stock moves beyond a support or resistance level but lacks the momentum to sustain that move, often prompting traders to close positions due to diminished profit prospects.

DraftKings Stock Performance Overview (2019–2024)

DraftKings debuted publicly at $10.80 in December 2019, initiating a strong upward trend to $19.50 by March 2020. The pandemic-induced market crash caused a swift 46% drop over six sessions, dipping below the IPO price before stabilizing. The stock then consolidated through April and surged past previous highs, reaching the mid-$40s by early June.

Following a rounded correction supported by the 50-day EMA, DraftKings broke out again in September, hitting its all-time high in October. The subsequent decline was sharp and sustained, with daily relative strength indicators plunging to deeply oversold levels as the stock found harmonic support near the 0.786 Fibonacci retracement level.

Weekly relative strength readings also indicate oversold conditions, suggesting a potential multi-week recovery. However, significant technical damage implies that gains may be volatile and sideways rather than a swift upward rally. Recovery depends heavily on renewed accumulation and sponsorship growth, which may hinge on the pandemic's trajectory and the return of traditional sports viewership.

Investment Tip

Relative strength investing focuses on selecting securities outperforming their market or benchmark indexes, such as tech stocks leading the Nasdaq or large-cap stocks outperforming the S&P 500, helping investors identify momentum and value opportunities.

Conclusion

While DraftKings stock appears to have bottomed following a steep decline, rebuilding momentum will require time and favorable market conditions. Investors should watch for technical recovery signals and ongoing developments in the sports betting landscape throughout 2024.

Disclosure: The author held shares of DraftKings in a family account at the time of writing.

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